The Post Great Recession US Economy

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "The Post Great Recession US Economy"

Transcription

1 The Post Great Recession US Economy

2 The Post Great Recession US Economy Implications for Financial Markets and the Economy Philip Arestis and Elias Karakitsos

3 Philip Arestis and Elias Karakitsos 2010 Softcover reprint of the hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6 10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act First published 2010 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number , of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin s Press LLC, 175 Fifth Avenue, New York, NY Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave and Macmillan are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN ISBN (ebook) DOI / This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress Transferred to Digital Printing in 2014

4 This book is dedicated to our children: Stefan, Natalia and her husband Tom; and especially to my grandson, Alec (Philip Arestis) Nepheli and Eliza (Elias Karakitsos)

5 Contents List of Figures List of Tables Prolegomena Preface to the Second Edition viii xiii xiv xxi 1 Introduction 1 2 The Causes and Consequences of the Internet Bubble 23 3 The Current Financial Crisis and the Origins of Excessive Liquidity 41 4 Wages and Prices and the Proper Conduct of Monetary Policy 58 5 Corporate Profits and Relationship to Investment 97 6 Long- Term Risks to Investment Recovery The Housing Market and Residential Investment Long- Term Risks of Robust Consumer Behaviour Foreign Demand The US External Imbalance and the Dollar: A Long- Term View The Long- term Risks to US Financial Markets 273 Notes 303 Bibliography 310 Index 318 vii

6 List of Figures 1.1 The stance of monetary policy The output gap Headline CPI-inflation Federal government budget deficit or surplus as % of GDP Decomposition of Federal budget Orders inventories gap and production Real GDP Real consumer expenditure Real gross private domestic investment Real exports of goods & services CPI all items, headline inflation CPI, headline & core inflation CPI, PPI & imported inflation The PPI inflation chain Output prices and labour cost Wages, productivity and unit labour cost in nonfarm business A naïve inflation model based on money supply and the price of oil GDP deflator The rationale of the K- Model (wage price spiral) Business cycle US business cycles The output gap Headline CPI-inflation Corporate profits with IVA & CCA as % of nominal GDP GDP and profits 101 viii

7 List of Figures ix 5.3 Contribution of unit profit and volume of sales to total profits Unit profit and profit margin Profit margin and unit labour cost The profit model Wages, productivity and unit labour cost in nonfarm business Total profits NFC %YoY Profit margin and wage price spiral Business investment and government expenditure as % of GDP Investment as a % of GDP Capacity utilisation in manufacturing Total profits NFC % YoY Unit labour cost % YoY Inventory to sales ratio in manufacturing Total industrial production % YoY Corporate sector net worth as % of GDP Corporate sector debt as % of GDP Corporate debt % YoY Degree of debt leverage: corporate sector debt as % of internal funds Long- term debt (securities & mortgages) to total debt Spread between AAA yield and prime lending rate Spread between Baa yield and prime lending rate Interest payments as % of net cash flow Investment model Real gross investment Industrial production Capacity utilisation short- run equilibrium US PMI short- run equilibrium 145

8 x List of Figures 7.1 Residential investment and Fed funds rate Median new house price Median price existing homes Sales of existing homes Regional house price inflation Relative median price existing homes Relative average house price inflation Debt service burden Median price of existing homes relative to per capita nominal disposable income House price inflation (6M MA) existing home sales Gross, net real estate of households and mortgage debt House prices, real disposable income and real personal income House prices, interest rates and debt service House prices, net real estate and mortgage debt Sales of existing homes and prices House prices, existing home sales and real residential investment The housing market loop Consumption % YoY Personal income & wages and salaries (nominal) Wages & salaries in private industries & government Other personal income % YoY Fiscal support to the personal sector Personal income and disposable personal income (nominal) Nominal & real personal disposable income Real personal disposable income Average weekly hours in manufacturing Monthly job creation/losses in nonfarm payroll, 6M MA (thousands) Nominal and real wages 191

9 List of Figures xi 8.12 Real hourly earnings in nonfarm business Household net wealth Personal sector net wealth as % of disposable income Financial assets and debt of the personal sector Tangible assets & real estate Debt service burden The income consumption loop US nominal & real effective exchange rate Japan nominal & real exchange rate EU exchange rate & competitiveness US exports determinants EU exports determinants a The stance of EU fiscal policy b The stance of EU monetary policy Japan exports determinants Exports multiplier with respect to OECD industrial production Exports multiplier with respect to OECD industrial production adjusted for share of exports to GDP Exports multiplier with respect to competitiveness Exports multiplier with respect to competitiveness adjusted for share of exports to GDP Effect on EU exports no euro change (unchanged at Oct value) OECD industrial production (based on US ISM) short- run equilibrium US industrial production (based on ISM) short- run equilibrium US PMI short- run equilibrium US real exports (based on the momentum of US ISM) EU exports short- run equilibrium JP real exports (based on the momentum of US ISM) short- run equilibrium US balance of payments 241

10 xii List of Figures 10.2 Rest of the world (ROW) net worth (US assets held by ROW less ROW assets held by the US) ROW net credit market position (assets held by ROW less assets held by the US) ROW net money market position (US assets held by ROW less ROW assets held by the US) ROW net equity position (assets held by ROW less assets held by the US) ROW net FDI position (assets held by ROW less assets held by the US) Direct holdings of equities held by the personal sector Total holdings of equities by the personal sector US stock equity holdings by foreign residents a Net purchases of US equities by US & foreign residents b Capital flows money, bonds & equities (inflows less outflows) as a % of GDP a Three possible equilibria in a non- cooperative game b Inflation and growth in the business cycle c The choice of equilibrium The euro dollar rate Real dollar exchange rate long- run fair value & valuation Real dollar exchange rate short- run fair value & valuation Asset- led business cycle year Fed funds yield curve Japan: holdings of US Treasuries China: holdings of US Treasuries Long- run valuation of 10-year yield Short- run equilibrium of US 10-year yield S&P and profits in logs Long- term valuation of equities Real S&P 2008 prices 299

11 List of Tables 4.1 A naïve inflation model based on money supply and the price of oil A model of the US GDP-deflator US business cycles in the post- Second World War period Cycle characteristics US housing market multipliers Sources and disposition of personal income Personal sector balance sheet Federal debt and its finance 286 xiii

12 Prolegomena The issues covered in the book In the last ten years or so there has been a series of bubbles, but judged in terms of their impact on the economy three have been particularly notable, namely the internet, the housing and the commodities bubbles. Do these bubbles have common roots or are they independent of one another? What are the consequences of the bursting of each bubble? What are the similarities and differences? What policies should be pursued to avert future bubbles from ballooning and bursting? These are the key questions addressed in this book. The early 2000s US recession was very mild, in spite of the bursting of the internet bubble, which was one of the worst in monetary history. Equity prices fell precipitously, yet the consumer remained resilient. The bursting of a typical bubble implies retrenchment by the personal and corporate sectors, as falling asset prices create a gap (i.e. an imbalance) between the assets and the liabilities of the private sector. In the euphoria years in which the bubble balloons, both companies and households accumulate disproportionate amounts of debt, induced by rising asset prices. Once the bubble bursts and asset prices collapse, the high level of debt is incompatible with the new low level of asset prices. The moment companies and households accept that the new level of asset prices is permanent rather than temporary, they try to repay their debts and rebuild their wealth by saving more, thereby dragging the economy into a severe recession characterised by asset and debt deflation. This process of asset and debt deflation is a long and painful one, as it usually infects the balance sheet of the commercial banks, which respond by cutting new credit (credit crunch), thereby accelerating the bankruptcies of companies and households. The experiences of the Great Depression of , of the Great Depression of the 1930s and of Japan in the 1990s show that the bursting of every bubble has exactly these characteristics and policymakers have little scope to smooth this process. Yet the US experience of the internet bubble was very different. Asset prices fell as in a typical bubble, yet the economy experienced the mildest recession. The personal sector continued to accumulate debt, while the corporate sector reduced it only slightly. Two factors may account for this experience and emergence of imbalances. The first is xiv

13 Prolegomena xv that monetary policy may have achieved a soft landing of the economy. The second is that investors regarded the bursting of the bubble as a temporary rather than a permanent phenomenon. The two issues may not be independent, however, as the over- accommodative monetary policy adopted in may have transformed the internet bubble into a housing bubble. These are further issues addressed in the book. The lower level of geopolitical risks after the end of the Iraq War, coupled with the subsidence of the governance crisis and the perfect timing of yet another fiscal package in 2003, as well as the accommodating stance of monetary policy in the downswing, combined to create a booming economy in the last nine months of 2003, which put the US economy on a sustainable path to recovery during the course of The strength of the US rebound was such as to pull with it the rest of the world. Confidence was buoyed and signs that deflation in Japan was coming to an end boosted hopes that the worst was over. The previous three years looked like a nightmare that belonged to the past. Yet, three years later a much worse storm hit the US economy and the world at large with its toll on citadels like China that were supposed to remain immune to this tsunami. The US housing market dropped, causing huge losses in financial institutions that sparked a credit crisis, which spread very rapidly to the rest of the world. The recession was mild at the beginning, but as the credit crisis unfolded a negative spiral emerged between the economy and the credit crisis. As the recession deepened, the credit crisis was magnified with a further impact on the economy. It is in this context that the questions raised earlier on are pertinent. Are the two crises of the early and the late 2000s independent of each other? Or, do they have common roots? What were the reasons for this contagion effect? The First Edition of this book warned that the imbalances from the bursting of the internet bubble were not corrected, but remained like skeletons in the cupboard, ready to be unleashed once there was a rise in long- term interest rates. Have these imbalances been corrected as a result of the current deep and protracted recession or have they been put back in the cupboard, ready to haunt us yet again at the next opportunity? This Second Edition warns once more that the policies pursued have simply brushed under the carpet the imbalances of the various sectors and it is again a matter of time before they strike yet again. So, what are the prospects of the US economy in the near term and the long term? These are further key questions addressed by this book. Equity markets recovered after the spring of 2003 and they went from strength to strength over the following three years. Optimism supplanted pessimism with many people believing that this was the

14 xvi Prolegomena beginning of a new and long-lasting bull market. Yet in real terms equity markets have never matched the highs of Consequently, the rapid advance in stock prices between 2003 and 2007 was simply a protracted strong bear market rally. Equity markets peaked in 2007 and fell precipitously in the following two years, hitting a lower bottom than in the early 2000s bear market. At this juncture the expected recovery has triggered a stupendous rally since March The shares of zombie financial institutions have produced the most stunning returns in the last six months and optimism is again running high that the worst is over and that the expected recovery heralds the beginning of a new and long- lasting bull market. But is such optimism justified? What are the prospects for the US and global stock markets? What are the prospects for bonds? Are bond yields likely to rise in the next few years causing equity prices to tumble, and thereby triggering a future recession? What are the risks that investors should consider when working their investment strategy over the next few years? Should they overweigh equities and dump bonds in their portfolios? What about the dollar? In the six years to 2008 the dollar fell a great deal, but disproportionately with respect to some currencies, like, for example, the euro and the pound sterling. In the midst of the recent credit crisis the dollar strengthened, but it fell again as hopes of a recovery emerged. Is this temporary or is it, rather, the beginning of a new long- lasting downtrend? The prospects and risks to financial markets is yet another issue addressed in this book. As a precursor of what is to follow, this book again warns that the recent advance of stocks is most likely to be another bear market rally that may last for a number of years before it fizzles out yet again. The premise of this book is that unless the various sector imbalances are corrected the world at large will remain in a protracted bear market with bear market rallies that may be strong and lasting for a few years. However, these rallies will fizzle out ultimately with each bottom being lower than the previous one. The reason why these imbalances have not been corrected in every recession is that the excessive liquidity that has financed these successive bubbles has never been drained from the system. In fact, every time a recession occurs the policymakers pump in increasing amounts of liquidity to deflect the asset and debt deflation process. The verdict on the dollar is that unless the imbalances are corrected it will remain on a long downtrend. A weak dollar provides the mechanism through this excessive liquidity is channelled abroad generating world bubbles. The policy debate on how to deal with bubbles concentrates on two polar views. The first is that central banks should leave financial markets to function freely on their own and asset price inflation should not be

15 Prolegomena xvii the concern of a central bank. However, a central bank should deal with the consequences of the bursting of a bubble. The opposite view is that asset price inflation is as bad as inflation in goods and services and as the latter is in the realm of a central bank so should the control of asset price inflation be. Thus, the policy debate can be summarised as dealing proactively and pre- emptively with bubbles, or reactively with their consequences. The Fed has clearly played with the proactive approach in the early days of the bubble with the familiar irrational exuberance remarks. But in the event, it opted for the reactive approach of dealing with the consequences, as it cut the Fed funds rate aggressively in the early 2000s recession in a way that was not justified by the depth of the recession. The pursuit of such a policy seems to have paid off and it has done a great deal to restore the tarnished reputation of the Fed in the aftermath of the bursting of the internet bubble. But the bursting of the housing bubble has cast doubt on the Fed s approach of dealing with the consequences of the bursting of the bubble and has put back on the agenda the proactive role of monetary policy in dealing with asset price inflation. Moreover, it has sparked criticism that the housing bubble has its roots to this very accommodative monetary policy that was meant to deflect the asset and debt deflation process. The difficulty with a proactive and pre- emptive approach stems from what should be the target for monetary policy, as it would be inappropriate for a central bank to have a target for one of its stock market indices or house prices. The book addresses this issue and makes appropriate recommendations, crucially net wealth targeting, which deals with the consequences of the bubble on the spending decisions of households. This can provide the basis for proactive monetary policy on asset price inflation. How this book should be read and its potential readership The book is particularly relevant to investors in world financial markets, as it addresses the prospects and risks to financial markets emanating from the post- housing bubble US economy. Although it is confined to the US economy it has implications for global markets, given the leading global role played by the US. The book is not just a narration of events and prospects as well as risks to the economy and financial markets, but also offers an in- depth analysis of the thinking process that underlines the sophisticated formation of the investment strategy of major financial institutions. The methodology of the book, therefore, is that it begins with the realities of the US economy, where the factual analysis makes

16 xviii Prolegomena good use of available data, fully cited and explained, before the analysis builds upon them to articulate the theoretical background involved in each case. The more empirical aspects of the book then follow. This thinking process is based on a top- down approach, which formalises the view that asset prices, at any point in time, reflect market discounting of how the central bank should respond to the state of the economy, as judged by the latest available information. This thinking process is encapsulated in the macro- financial model, which is an integrated system for analysing systematically macro and financial data that leads to an informed investment decision- making process. The book effectively describes that process by analysing in every chapter one constituent component of the macro- financial model, to which we have just referred, that leads to a synthesis in the last two chapters that deal with the dollar, bonds and equities. The structure of the book follows the rationale of this top- down approach of the macro- financial model. The book, therefore, may be particularly relevant to Chief Investment Officers, portfolio managers, traders and individual investors, who may be interested in the state- of- the- art methodology for the analysis of financial markets and the process of investment strategy. From this point of view, the emphasis in this book is not on the conclusions of the current investment strategy, which, by definition, would be obsolete by the time the book is published. The emphasis is, rather, on the methodology underlying the analysis of financial markets and investment strategy. However, the book is not solely for the benefit of the sophisticated investor. Indeed, it has been written with the economist also in mind, especially the academics, along with those non- economists who are interested in understanding the causes and consequences for the economy and financial markets of the series of bubbles that have emerged over the course of the past ten years. Policymakers may also be interested in the issue, since there are serious policy implications involved. The book has been structured in such a way as to embrace such diverse readership. The reader can get a quick first impression of all the issues covered in the book by reading the summary and conclusions at the end of each chapter. All of the chapters have a similar structure so that an approach to reading the book can be formulated. Every chapter begins with the issues that are explored subsequently. It then offers an analysis of the relevant statistics that form the basis of the analysis. This does not require any prior knowledge and provides easy reading. Yet the analysis is deep enough so that the alert reader can guess the model behind the thinking process. Next follows a lengthy explanation of the relevant parts of the model that are relevant to the issue in hand. The purpose of

17 Prolegomena xix this section is to provide not a textbook treatment of, say, investment or consumption, but rather a formal description of the variables that should be monitored in order to form an opinion of how, say, companies or households reach their decisions on spending and investment and the risks in the current economic climate. A flow chart explains the interrelationship of the key variables in each chapter, which the interested reader can study independently of the rest of that section. Reference to the work of others is given so that the reader can put the model in perspective, without burdening the book as if it was a review article. We have avoided mathematics, as they are not appropriate for the general readership we have in mind, although the more mathematically inclined economists should not be disappointed by its absence. We have attempted to describe in words formal mathematical relationships and simply summarise the functional forms that hold in the longrun equilibrium, so that the interested reader can form an opinion of the depth of the analysis. Even that simple functional form should not frighten the general reader, who can skip it without missing anything from the relevant sections. For the mathematically inclined reader, though, it might summarise, in a succinct way, the verbal arguments and avoid the confusion that usually arises by verbal explanation. Only our readers can judge whether we have succeeded in this difficult task. Finally, every chapter provides an analysis of the prospects and risks for the relevant section of the economy or financial market. The prospects are evaluated through a projection of the macro- financial model. In this context it is worth mentioning the change of emphasis between the two editions of this book. In the First Edition risk analysis was based on detailed simulation analysis as this was meant for methodological reasons. However, in the Second Edition the scope of the book has been expanded to cover the similarities and differences between the two bubbles and also how asset- led business cycles differ from those in the past. Space limitation has its casualties and the detailed simulation analysis is one of them. One final comment is pertinent. Although in every chapter we describe the appropriate part of the macro- financial model utilised, we do not offer the numerical values of the relevant equations. Instead, we provide a graph that depicts how closely the model can explain the relevant variable and offer the forecast error. We believe that a detailed analysis of the numerical values of the model and its statistical properties would not be satisfactory in view of space limitations. In any case, such an attempt would have detracted from the main analysis, purpose and focus of the project, without adding significantly to the book.

18 xx Prolegomena Data series The data used throughout this book cover the period and they are either quarterly or monthly as indicated. The data are the official figures as made available by Thomson Reuters EcoWin Pro, a live databank (see The book has been written using the data available at the time of writing each chapter and no attempt has been made to update each chapter as new data has come in, as otherwise the process would have been never ending. Thus, quarterly data have been used up to the second quarter of 2009 and monthly data up to August Acknowledgements We would very much like to thank Taiba Batool and Gemma Papageorgiou of Palgrave Macmillan, and their staff, for the encouragement and efficiency throughout the duration of this project. We would also wish to thank colleagues at the Cambridge Centre for Economic and Public Policy, University of Cambridge, and at the Departamento de Economia Aplicada V, Universidad del País Vasco, Spain, for comments on a number of occasions on chapters of this book. Also for the comments by the participants to the joint conferences of the two institutions at which chapters included in the book have been presented over a number of years. We are also grateful to a few more individuals. These include, in particular, Epaminondas Embiricos, Jonathan Edwards, John Mather and Lambros Varnavides, who have read the entire manuscript and have made useful comments. We are very grateful to all we have mentioned for their continuous support throughout the period of writing this book. Without their support this project would not have been completed.

19 Preface to the Second Edition The asset and debt deflation process (or the economics of depression as they are labelled by Krugman, 2008) is little understood and even less appreciated, in both theory and policy. However, it is precisely this process that has been relevant since the early 1990s, first with balance sheet problems in the corporate sector (the 1991 cycle), then with balance sheet problems in the personal sector (the 2001 cycle) and now (the 2008 cycle) with balance sheet problems in the banking and personal sectors. Alan Greenspan, the ex- governor of the Federal Reserve System (the Fed), was the first to recognise that the 1990s were different than what had gone before when he characterised the rally in equities in 1996 as irrational exuberance. Economic theory and business cycle analysis treats the last three cycles (including the current one) as not different from previous ones. Furthermore in dealing with the past three cycles policymakers have also applied the same medicine as in other cycles. The failure of theory and policy to appreciate that asset- led cycles are different from the demand cycles of the 1950s and 1960s and the supply cycles of the 1970s and 1980s has made each of the last three cycles worse than the previous one. This is clearly an unstable situation which give rise to successive bubbles, each one being bigger than the previous one and each recession being worse than the one before. In a nutshell it is excessive liquidity that creates these bubbles and it is policy responses that add further liquidity every time a bubble bursts, which sows the seeds for the next bubble. The return to normality requires that policymakers drain the excess liquidity and allow debt deleveraging, while accepting that the current level of asset prices is not far from equilibrium. In other words, policymakers should stop trying to restore previous levels of asset prices. But this has not happened yet! Hence, more trouble is brewing for the future. In the First Edition of the book, The Post- Bubble US Economy: Implications for Financial Markets and the Economy (Arestis and Kararkitsos, 2004), we described the asset and debt deflation process and assessed its impact on the economy through the K- Model. We claimed that an appreciation of this process requires an explanation of the role of the savings ratio in consumer decisions, which contradicts the principles of the widely accepted Life- Cycle and Permanent Income Hypothesis. xxi

20 xxii Preface to the Second Edition In this traditional approach the savings ratio moves pro- cyclically it rises in a boom and falls in a recession on the premise that consumers smooth out their consumption in the face of volatile income both in the course of the business cycle and throughout their lifetime. However, we have shown that in leveraged economies this does not characterise the behaviour of households in the real world. In fact, we argued in the First Edition that the opposite is happening; the savings ratio moves counter- cyclically, it falls in the upswing of the cycle, accentuating the boom, and rises in the downswing of the cycle, worsening the recession. This counter- cyclical pattern is built into the K- Model, where the savings ratio depends on the net wealth of the personal sector, job security, income growth prospects and the debt service burden. But rejection of the traditional Life- Cycle and Permanent Income Hypothesis in leveraged economies is only the first step towards the economics of depression. What is also required is an explanation of the net wealth of households and the net worth of the corporate sector. Both of these variables are omitted in any synthesis of current macroeconomics, like the New Consensus Macroeconomics. Including a net wealth effect in consumption and the net worth of the corporate sector in investment is not sufficient. What is required is models for explaining the constituent components of the asset and liability sides of the net wealth of households and the net worth of the corporate sector. In the First Edition an entire chapter was devoted to housing, while its influence on the savings ratio was analysed in the chapter on consumption. Leamer (2007) claims that the current woes in the economy are due to the omission of housing in macroeconomic theory and business cycle analysis, as well as in policy. In the First Edition we claimed that the internet bubble will be transformed into a housing bubble and we looked at the conditions under which the housing market will burst and whether the housing market will experience a soft landing in 2004 and In subsequent work, Arestis and Karakitsos (2007, 2008), we warned that the boom in the housing market has turned into a bubble and argued that it will burst when the 30-year mortgage rate exceeds 7 percent a condition that has proved sufficient. The third step that is required in the economics of depression is an explanation of the role of financial assets (equities, bonds and the dollar) and their interaction with the real side of the economy and inflation. Financial markets play a key role in creating bubbles. Chapters 9 and 10 of the First Edition were devoted to this task. In this framework, which is exemplified in the K- Model, asset- led business cycles can be understood and appreciated. When excess

21 Preface to the Second Edition xxiii liquidity is allowed to be generated asset prices (equities in the 2001 cycle and houses in the 2008 cycle) soar and debt leverage is increasing. This boosts the net wealth of households, lowers the savings ratio and stimulates investment and consumption, creating euphoria. In the initial phase of this process inflation declines or simply remains subdued. At some point, though, the economic boom creates overheating and inflation creeps up. The central bank hikes rates to check inflation and by doing so it pricks the bubble, a feature that characterised Japan in the 1990s and the US in the last two cycles. Once the bubble bursts, asset prices fall and what is left is an overhang of debt in the personal and corporate sectors. Whereas access to capital markets eases the required balance sheet adjustment of companies, households try to curb debt and restore the value of their net wealth by raising the savings ratio and cutting consumption. The asset and debt deflation is then unfolding deepening and prolonging the recession. In this framework policymakers should not allow the expansion of credit in the first instance. They are simply mistaken when they look at the low growth in monetary aggregates that makes them feel that everything is alright, as financial innovation is creating the excess liquidity without this being reflected in monetary aggregates. Strict regulation might do the trick, but in a market economy it may be better if the policy makers adopt a net wealth target in addition to the two traditional targets of inflation and the output gap. These were the conclusions of the First Edition and they are still valid now. But whereas future crises can be averted through the adoption of a net wealth target, the way out of the current crisis is an orderly deleverage of the system through the draining of excess liquidity and the acceptance of subpar growth for the next few years. But this is not what is happening. In the Second Edition we have retained the same structure, as it essentially explains the asset and debt deflation process. However, we have tried to make it relevant to what will happen next, in view of the current financial crisis. Thus, we have changed the title of this edition to The Post Great Recession US Economy: Implications for Financial Markets and the Economy. This is because the First Edition was preoccupied with whether the housing market will have a soft landing in the two- year projection of There is a difference, though, in the emphasis between the two editions. Instead of illustrating how the K- Model can be used to make a quantitative assessment of the impact of policy, in the Second Edition we attempt to compare and contrast asset- led business cycles with demand and supply ones. We have done this in a systematic way when we examine in the various chapters the

22 xxiv Preface to the Second Edition components of aggregate demand, inflation and asset prices (houses, equities, bonds and the dollar). Since policy still holds the key to what will happen next, we have assessed the risks to the economy over the next few years in every chapter by contrasting what should happen if the policymakers allowed debt deleveraging to take place with what would happen if the policymakers attempted to restore asset high prices. From this perspective the following differences have emerged in the Second Edition. The Introduction now puts into perspective the current economic situation and offers an assessment of the opposing policies. Chapter 2 is the same as in the First Edition. It deals with the internet bubble. Chapter 3 is entirely new and is devoted to an in- depth analysis of the current crisis. The remainder of the chapters follow the First Edition, but with the aforementioned change of emphasis and, of course, the full updating of all of them, including chapter October 2009.

Fiscal Sustainability and Competitiveness in Europe and Asia

Fiscal Sustainability and Competitiveness in Europe and Asia Fiscal Sustainability and Competitiveness in Europe and Asia This page Intentionally left blank Fiscal Sustainability and Competitiveness in Europe and Asia Ramkishen S. Rajan Adjunct Senior Research Fellow,

More information

Structural Revolution in International Business Architecture

Structural Revolution in International Business Architecture Structural Revolution in International Business Architecture Structural Revolution in International Business Architecture Modelling and Analysis: Volume 1 Dipak Basu Nagasaki University, Japan Victoria

More information

This page intentionally left blank

This page intentionally left blank The Future BRICS This page intentionally left blank The Future BRICS A Synergistic Economic Alliance or Business as Usual? Rich Marino Rich Marino 2014 Softcover reprint of the hardcover 1st edition 2014

More information

Also by Steven I. Davis

Also by Steven I. Davis Banking in Turmoil Also by Steven I. Davis AFTER THE CREDIT CRISIS: Best Practice in Banking the High Net Worth Individual BANCASSURANCE: The Lessons of Global Experience in Banking and Insurance Collaboration

More information

International Papers in Political Economy

International Papers in Political Economy International Papers in Political Economy International Papers in Political Economy Series Series Editors: Philip Arestis and Malcolm Sawyer Titles include: Philip Arestis and Malcolm Sawyer (editors)

More information

Marketing in the Emerging Markets of Latin America

Marketing in the Emerging Markets of Latin America Marketing in the Emerging Markets of Latin America Also by Marin Marinov MARKETING IN THE EMERGING MARKETS OF CENTRAL AND EASTERN EUROPE: The Balkans INTERNATIONALIZATION IN CENTRAL AND EASTERN EUROPE

More information

Estimating SMEs Cost of Equity Using a Value at Risk Approach

Estimating SMEs Cost of Equity Using a Value at Risk Approach Estimating SMEs Cost of Equity Using a Value at Risk Approach This page intentionally left blank Estimating SMEs Cost of Equity Using a Value at Risk Approach The Capital at Risk Model Federico Beltrame

More information

Monetary Policy and the Economy in South Africa

Monetary Policy and the Economy in South Africa Monetary Policy and the Economy in South Africa Monetary Policy and the Economy in South Africa Mthuli Ncube African Development Bank Group, South Africa and Eliphas Ndou Reserve Bank of South Africa,

More information

Dark Pools. The Structure and Future of Off-Exchange Trading and Liquidity ERIK BANKS

Dark Pools. The Structure and Future of Off-Exchange Trading and Liquidity ERIK BANKS Dark Pools Palgrave Macmillan Finance and Capital Markets Series For information about other titles in this series please visit the website http://www.palgrave.com/business/finance and capital markets.asp

More information

Trade, Investment and Competition in International Banking

Trade, Investment and Competition in International Banking Trade, Investment and Competition in International Banking This page intentionally left blank Trade, Investment and Competition in International Banking Aidan O Connor Aidan O Connor 2005 Softcover reprint

More information

Equity Derivatives Explained

Equity Derivatives Explained Equity Derivatives Explained Financial Engineering Explained About the series Financial Engineering Explained is a series of concise, practical guides to modern finance, focusing on key, technical areas

More information

The Reform of Macroeconomic Policy

The Reform of Macroeconomic Policy The Reform of Macroeconomic Policy Also by f. 0. N. Perkins A GENERAL APPROACH TO MACROECONOMIC POLICY ANTI-CYCLICAL POLICY IN AUSTRALIA AUSTRALIA IN THE WORLD ECONOMY AUSTRALIAN MACROECONOMIC POLICY,

More information

Leveraged Exchange-Traded Funds

Leveraged Exchange-Traded Funds Leveraged Exchange-Traded Funds Leveraged Exchange- Traded Funds A Comprehensive Guide to Structure, Pricing, and Performance Narat Charupat and Peter Miu LEVERAGED EXCHANGE-TRADED FUNDS Copyright Narat

More information

Understanding the Crisis in Greece

Understanding the Crisis in Greece Understanding the Crisis in Greece Also by Theodore Pelagidis WELFARE STATE AND DEMOCRACY IN CRISIS (co-edited) Understanding the Crisis in Greece From Boom to Bust Michael Mitsopoulos and Theodore Pelagidis

More information

MACROECONOMICS An Introductory Text

MACROECONOMICS An Introductory Text Macroeconomics MACROECONOMICS An Introductory Text John Evans-Pritchard B.Sc. Econ. M MACMILLAN John Evans-Pritchard 1985 Softcover reprint of the hardcover 1st edition 1985 978-0-333-39058-0 All rights

More information

Hybrid Securities Structuring, Pricing and Risk Assessment

Hybrid Securities Structuring, Pricing and Risk Assessment Hybrid Securities Hybrid Securities Structuring, Pricing and Risk Assessment Kamil Liberadzki and Marcin Liberadzki Warsaw School of Economics, Poland Kamil Liberadzki and Marcin Liberadzki 2016 Softcover

More information

Risk Management in Emerging Markets

Risk Management in Emerging Markets Risk Management in Emerging Markets Centre for the Study of Emerging Markets Series Series Editor: Dr Sima Motamen-Samadian The Centre for the Study of Emerging Markets (CSEM) Series provides a forum for

More information

Global Stock Markets and Portfolio Management

Global Stock Markets and Portfolio Management Global Stock Markets and Portfolio Management Centre for the Study of Emerging Markets Series Series Editor: Dr Sima Motamen-Samadian The Centre for the Study of Emerging Markets (CSEM) Series provides

More information

Sovereign Risk and Public-Private Partnership During the Euro Crisis

Sovereign Risk and Public-Private Partnership During the Euro Crisis Sovereign Risk and Public-Private Partnership During the Euro Crisis This page intentionally left blank Sovereign Risk and Public- Private Partnership During the Euro Crisis Maura Campra University of

More information

Microcredit Guarantee Funds in the Mediterranean

Microcredit Guarantee Funds in the Mediterranean Microcredit Guarantee Funds in the Mediterranean Palgrave Studies in Impact Finance Series Editor: Mario La Torre The Palgrave Studies in Impact Finance series provides a valuable scientific hub for re-searchers,

More information

EUROPEAN MACROECONOMICS

EUROPEAN MACROECONOMICS EUROPEAN MACROECONOMICS EUROPEAN MACROECONOMICS Robert Barro and Vittorio Grilli M MACMILLAN Robert J. Barro and Vittorio Grilli 1994 All rights reserved. No reproduction, copy or transmission of this

More information

Public Credit Rating Agencies

Public Credit Rating Agencies Public Credit Rating Agencies Public Credit Rating Agencies Increasing Capital Investment and Lending Stability in Volatile Markets Susan K. Schroeder PUBLIC CREDIT RATING AGENCIES Copyright Susan K.

More information

Asset Markets, Portfolio Choice and Macroeconomic Activity

Asset Markets, Portfolio Choice and Macroeconomic Activity Asset Markets, Portfolio Choice and Macroeconomic Activity Asset Markets, Portfolio Choice and Macroeconomic Activity A Keynesian Perspective Toichiro Asada Professor of Economics, Chuo University, Tokyo,

More information

Regionalism among Developing Countries

Regionalism among Developing Countries Regionalism among Developing Countries Also by Sheila Page HOW DEVELOPING COUNTRIES TRADE TRADE, FINANCE AND DEVELOPING COUNTRIES: Strategies and Constraints in the 1990s MONETARY POLICY IN DEVELOPING

More information

Governance and Risk in Emerging and Global Markets

Governance and Risk in Emerging and Global Markets Governance and Risk in Emerging and Global Markets Centre for the Study of Emerging Markets Series Series Editor: Dr Sima Motamen-Samadian The Centre for the Study of Emerging Markets (CSEM) Series provides

More information

The Cost of Capital. Eva R. Porras

The Cost of Capital. Eva R. Porras The Cost of Capital The Cost of Capital Eva R. Porras Eva R. Porras 2011 Softcover reprint of the hardcover 1st edition 2011 978-0-230-20183-5 All rights reserved. No reproduction, copy or transmission

More information

Also by Francis A. Lees

Also by Francis A. Lees CHINA SUPERPOWER Also by Francis A. Lees BANKING AND FINANCIAL DEEPENING IN BRAZIL (with James M. Botts and Rubens Penha Cysne) FOREIGN BANKING AND INVESTMENT IN THE UNITED STATES GLOBAL FINANCE INTERNATIONAL

More information

QUANTITATIVE METHODS FOR ELECTRICITY TRADING AND RISK MANAGEMENT

QUANTITATIVE METHODS FOR ELECTRICITY TRADING AND RISK MANAGEMENT QUANTITATIVE METHODS FOR ELECTRICITY TRADING AND RISK MANAGEMENT This page intentionally left blank Quantitative Methods for Electricity Trading and Risk Management Advanced Mathematical and Statistical

More information

THE BANKING SYSTEM OF CYPRUS

THE BANKING SYSTEM OF CYPRUS THE BANKING SYSTEM OF CYPRUS Also by Kate Phylaktis FINANCIAL DATA OF BANKS AND OTHER FINANCIAL INSTITUTIONS INTERNATIONAL FINANCE AND THE LESS DEVELOPED COUNTRIES (editor with M. Pradhan) The Banking

More information

Small Countries in a Global Economy

Small Countries in a Global Economy Small Countries in a Global Economy Also by Dominick Salvatore INTERNATIONAL ECONOMICS (seventh edition) MANAGERIAL ECONOMICS IN A GLOBAL ECONOMY (fourth edition) Also by loze P. Damijan SMALL COUNTRIES

More information

Economic Importance of Keynesian and Neoclassical Economic Theories to Development

Economic Importance of Keynesian and Neoclassical Economic Theories to Development University of Turin From the SelectedWorks of Prince Opoku Agyemang May 1, 2014 Economic Importance of Keynesian and Neoclassical Economic Theories to Development Prince Opoku Agyemang Available at: https://works.bepress.com/prince_opokuagyemang/2/

More information

MIDDLE-CLASS BLACKS IN BRITAIN

MIDDLE-CLASS BLACKS IN BRITAIN MIDDLE-CLASS BLACKS IN BRITAIN Middle -Class Blacks in Britain A Racial Fraction of a Class Group or a Class Fraction of a Racial Group? Sharon J. Daye M St. Martin's Press Sharon J. Daye 1994 Softcover

More information

U r b a n L a n d. Economics. J a c k H a r v e y & E r n i e J o w s e y

U r b a n L a n d. Economics. J a c k H a r v e y & E r n i e J o w s e y U r b a n L a n d Economics J a c k H a r v e y & E r n i e J o w s e y S i x t h E d i t i o n URBAN L A N D ECONOMICS By Jack Harvey BASIC ECONOMICS BASIC ECONOMICS WORKBOOK ELEMENTARY ECONOMICS WORKBOOK

More information

PROJECT ANALYSIS IN DEVELOPING COUNTRIES

PROJECT ANALYSIS IN DEVELOPING COUNTRIES PROJECT ANALYSIS IN DEVELOPING COUNTRIES This page intentionally left blank Project Analysis in Developing Countries Steve Curry Lecturer, Development and Project Planning Centre University of Bradford

More information

Market Timing and Moving Averages

Market Timing and Moving Averages Market Timing and Moving Averages Market Timing and Moving Averages An Empirical Analysis of Performance in Asset Allocation PASKALIS GLABADANIDIS MARKET TIMING AND MOVING AVERAGES Copyright Paskalis

More information

THE REGIONAL DISTRIBUTION OF FOREIGN MANUFACTURING INVESTMENT IN THE UK

THE REGIONAL DISTRIBUTION OF FOREIGN MANUFACTURING INVESTMENT IN THE UK THE REGIONAL DISTRIBUTION OF FOREIGN MANUFACTURING INVESTMENT IN THE UK Also by Stephen Hill FUNDAMENTALS OF MANAGERIAL ECONOMICS (with Julian Gough) MANAGERIAL ECONOMICS TIME, WORK AND ORGANISATION (with

More information

Cross-border Mergers and Acquisitions

Cross-border Mergers and Acquisitions Cross-border Mergers and Acquisitions This page intentionally left blank Cross-border Mergers and Acquisitions Theory and Empirical Evidence Ottorino Morresi and Alberto Pezzi cross-border mergers and

More information

Project Analysis in Developing Countries

Project Analysis in Developing Countries Project Analysis in Developing Countries Project Analysis in Developing Countries Steve Curry Senior ProjectEconomist Asian Development Bank Manila, Philippines and John Weiss Professor o( Development

More information

LENDING IN INTERNATIONAL COMMERCIAL BANKING

LENDING IN INTERNATIONAL COMMERCIAL BANKING LENDING IN INTERNATIONAL COMMERCIAL BANKING INTERNATIONAL BANKING SERIES Published by Palgrave Macmillan General Editor: Steven I. Davis Steven I. Davis THE MANAGEMENT OF INTERNATIONAL BANKS T. H. Donaldson

More information

Also by Shirley Dex BRITISH AND AMERICAN WOMEN AT WORK (with Lois B. Shaw) FRENCH AND BRITISH MOTHERS AT WORK (with Patricia Walters and David Alden)

Also by Shirley Dex BRITISH AND AMERICAN WOMEN AT WORK (with Lois B. Shaw) FRENCH AND BRITISH MOTHERS AT WORK (with Patricia Walters and David Alden) FLEXIBLE EMPLOYMENT Also by Shirley Dex BRITISH AND AMERICAN WOMEN AT WORK (with Lois B. Shaw) FRENCH AND BRITISH MOTHERS AT WORK (with Patricia Walters and David Alden) LIFE AND WORK HISTORY ANALYSES

More information

ENERGY HEDGING IN ASIA

ENERGY HEDGING IN ASIA ENERGY HEDGING IN ASIA This page intentionally left blank Energy Hedging in Asia: Market Structure and Trading Opportunities PETER C. FUSARO AND TOM JAMES Peter C. Fusaro and Tom James 2005 Softcover reprint

More information

DO WORLD BANK AND IMF POLICIES WORK?

DO WORLD BANK AND IMF POLICIES WORK? DO WORLD BANK AND IMF POLICIES WORK? Also by Shahrukh Rafi Khan HANDING BACK RURAL WATER SUPPLY SCHEMES TO COMMUNITIES: A Case for Collective Action JUST DEVELOPMENT: Beyond Adjustment with a Human Face

More information

Gauging Current Conditions:

Gauging Current Conditions: Gauging Current Conditions: The Economic Outlook and Its Impact on Workers Compensation Vol. 2 2005 The gauges below indicate the economic outlook for the current year and for 2006 for factors that typically

More information

Current Economic Conditions and Selected Forecasts

Current Economic Conditions and Selected Forecasts Order Code RL30329 Current Economic Conditions and Selected Forecasts Updated May 20, 2008 Gail E. Makinen Economic Policy Consultant Government and Finance Division Current Economic Conditions and Selected

More information

Reform and Responsibility in the Remaking of the Swedish National Pension System

Reform and Responsibility in the Remaking of the Swedish National Pension System Reform and Responsibility in the Remaking of the Swedish National Pension System Reform and Responsibility in the Remaking of the Swedish National Pension System Opening the Orange Envelope Anette Nyqvist

More information

Green Taxation in Question

Green Taxation in Question Green Taxation in Question Also by Carsten Daugbjerg POLICY NETWORK UNDER PRESSURE: Pollution Control, Policy Reform and the Power of Farmers Also by Gert Tinggaard Svendsen PUBLIC CHOICE AND ENVIRONMENTAL

More information

Implications of Fiscal Austerity for U.S. Monetary Policy

Implications of Fiscal Austerity for U.S. Monetary Policy Implications of Fiscal Austerity for U.S. Monetary Policy Eric S. Rosengren President & Chief Executive Officer Federal Reserve Bank of Boston The Global Interdependence Center Central Banking Conference

More information

APPENDIX: Country analyses

APPENDIX: Country analyses APPENDIX: Country analyses Appendix A Germany: Low economic momentum The economic situation in Germany continues to be lackluster in 2014. Strong growth in the first quarter was followed by a decline

More information

BANCASSURANCE IN EUROPE

BANCASSURANCE IN EUROPE BANCASSURANCE IN EUROPE Also by Tobias C. Hoschka CROSS-BORDER ENTRY IN EUROPEAN RETAIL FINANCIAL SERVICES Bancassurance in Europe Tobias C. Hoschka E. C. Research Fellow University ofoxford MSt. Martin's

More information

Global Financial Crisis and China s Countermeasures

Global Financial Crisis and China s Countermeasures Global Financial Crisis and China s Countermeasures Qin Xiao The year 2008 will go down in history as a once-in-a-century financial tsunami. This year, as the crisis spreads globally, the impact has been

More information

Monetary Policy Statement: March 2010

Monetary Policy Statement: March 2010 Central Bank of the Solomon Islands Monetary Policy Statement: March 2010 Central Bank of the Solomon Islands PO Box 634, Honiara, Solomon Islands Tel: (677) 21791 Fax: (677) 23513 www.cbsi.com.sb 1.Money

More information

Outlook for Economic Activity and Prices (October 2017)

Outlook for Economic Activity and Prices (October 2017) Outlook for Economic Activity and Prices (October 2017) October 31, 2017 Bank of Japan The Bank's View 1 Summary Japan's economy is likely to continue expanding on the back of highly accommodative financial

More information

Macroeconomics Robert J. Gordon Twelfth Edition

Macroeconomics Robert J. Gordon Twelfth Edition Macroeconomics Robert J. Gordon Twelfth Edition Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk

More information

John Wigley and Carol Lipman: The Enterprise Economy

John Wigley and Carol Lipman: The Enterprise Economy Taxation ECONOMICS TODAY Edited by Andrew Leake The Ecanomics Today series surveys contemporary headline topics in applied economics. Each book in the series is written by an expert in the field in a style

More information

Interest Rate Forecast

Interest Rate Forecast Interest Rate Forecast Economics January Highlights Global growth firms Waiting for Trumponomics Bank of Canada on hold Recent growth momentum in the global economy continued in December and looks to extend

More information

THE U.S. ECONOMY & STOCK MARKET

THE U.S. ECONOMY & STOCK MARKET THE U.S. ECONOMY & STOCK MARKET Stanley A. Nabi, CFA Vice Chairman August, 2011 EXHIBIT I Significant revisions of GDP data has reduced the magnitude of growth for several quarters and now indicate that

More information

Exploring the Economy s Progress and Outlook

Exploring the Economy s Progress and Outlook EMBARGOED UNTIL Friday, September 9, 2016 at 8:15 A.M. U.S. Eastern Time OR UPON DELIVERY Exploring the Economy s Progress and Outlook Eric S. Rosengren President & Chief Executive Officer Federal Reserve

More information

Macroeconomics Principles, Applications, and Tools O'Sullivan Sheffrin Perez Eighth Edition

Macroeconomics Principles, Applications, and Tools O'Sullivan Sheffrin Perez Eighth Edition Macroeconomics Principles, Applications, and Tools O'Sullivan Sheffrin Perez Eighth Edition Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the

More information

II. Major Engines of Sustained Economic Growth

II. Major Engines of Sustained Economic Growth Opening Speech by Toshihiko Fukui, Governor of the Bank of Japan I. Introduction Good morning, ladies and gentlemen. I am very pleased to address the 11th international conference hosted by the Institute

More information

Macroeconomics in an Open Economy

Macroeconomics in an Open Economy Chapter 17 (29) Macroeconomics in an Open Economy Chapter Summary Nearly all economies are open economies that trade with and invest in other economies. A closed economy has no interactions in trade or

More information

INTEGRATED FINANCIAL AND NON-FINANCIAL ACCOUNTS FOR THE INSTITUTIONAL SECTORS IN THE EURO AREA

INTEGRATED FINANCIAL AND NON-FINANCIAL ACCOUNTS FOR THE INSTITUTIONAL SECTORS IN THE EURO AREA INTEGRATED FINANCIAL AND NON-FINANCIAL ACCOUNTS FOR THE INSTITUTIONAL SECTORS IN THE EURO AREA In May 26 the published for the first time a set of annual integrated non-financial and financial accounts,

More information

OVERVIEW. The EU recovery is firming. Table 1: Overview - the winter 2014 forecast Real GDP. Unemployment rate. Inflation. Winter 2014 Winter 2014

OVERVIEW. The EU recovery is firming. Table 1: Overview - the winter 2014 forecast Real GDP. Unemployment rate. Inflation. Winter 2014 Winter 2014 OVERVIEW The EU recovery is firming Europe's economic recovery, which began in the second quarter of 2013, is expected to continue spreading across countries and gaining strength while at the same time

More information

Report of the Special Group on Public Service Numbers and Expenditure Programmes

Report of the Special Group on Public Service Numbers and Expenditure Programmes Report of the Special Group on Public Service Numbers and Expenditure Programmes Submission to the Joint Committee on Finance and the Public Service October 2009 Introduction The Irish Business and Employers

More information

The Hong Kong Economy in Contraction Mode

The Hong Kong Economy in Contraction Mode Irina Fan Senior Economist irinafan@hangseng.com Joanne Yim Chief Economist joanneyim@hangseng.com 22 December 08 The Hong Kong Economy in Contraction Mode Hong Kong is in recession and leading economic

More information

Balance-Sheet Adjustments and the Global Economy

Balance-Sheet Adjustments and the Global Economy November 16, 2009 Bank of Japan Balance-Sheet Adjustments and the Global Economy Speech at the Paris EUROPLACE Financial Forum in Tokyo Masaaki Shirakawa Governor of the Bank of Japan Introduction Thank

More information

Toshihiko Fukui: Economic activity and recent financial developments in Japan

Toshihiko Fukui: Economic activity and recent financial developments in Japan Toshihiko Fukui: Economic activity and recent financial developments in Japan Summary of a speech by Mr Toshihiko Fukui, Governor of the Bank of Japan, at a meeting with business people in Nagoya, 3 September

More information

Global Imbalances and Current Account Imbalances

Global Imbalances and Current Account Imbalances February 18, 2011 Bank of Japan Global Imbalances and Current Account Imbalances Remarks at the Banque de France Financial Stability Review Launch Event Masaaki Shirakawa Governor of the Bank of Japan

More information

Jürgen Stark: Financial stability the role of central banks. A new task? A new strategy? New tools?

Jürgen Stark: Financial stability the role of central banks. A new task? A new strategy? New tools? Jürgen Stark: Financial stability the role of central banks. A new task? A new strategy? New tools? Speech by Mr Jürgen Stark, Member of the Executive Board of the European Central Bank, at the Frankfurt

More information

FISCAL COUNCIL OPINION ON THE SUMMER FORECAST 2018 OF THE MINISTRY OF FINANCE

FISCAL COUNCIL OPINION ON THE SUMMER FORECAST 2018 OF THE MINISTRY OF FINANCE FISCAL COUNCIL OPINION ON THE SUMMER FORECAST 2018 OF THE MINISTRY OF FINANCE September 2018 Contents Opinion... 3 Explanatory Report... 4 Opinion on the summer forecast 2018 of the Ministry of Finance...

More information

EXECUTIVE SUMMARY. Global Economic Environment

EXECUTIVE SUMMARY. Global Economic Environment The global economy grew strongly in the first half of 2007, although turbulence in financial markets has clouded prospects. While the 2007 forecast has been little affected, the baseline projection for

More information

Gundlach: Treasuries will Rally When QE2 Ends

Gundlach: Treasuries will Rally When QE2 Ends Gundlach: Treasuries will Rally When QE2 Ends April 19, 2011 by Robert Huebscher The bonds that PIMCO s Bill Gross sold to take a 3% short position in the Treasury market may have found a buyer in Doubleline

More information

Progress Evaluation of the Transformation of China's Economic Growth Pattern 1 (Preliminary Draft Please do not quote)

Progress Evaluation of the Transformation of China's Economic Growth Pattern 1 (Preliminary Draft Please do not quote) Progress Evaluation of the Transformation of China's Economic Growth Pattern 1 (Preliminary Draft Please do not quote) Si Joong Kim 2 China has been attempting to transform its strategy of economic

More information

A GUIDE TO UNEMPLOYMENT REDUCTION MEASURES

A GUIDE TO UNEMPLOYMENT REDUCTION MEASURES A GUIDE TO UNEMPLOYMENT REDUCTION MEASURES Also by Edwin Whiting HOW TO GET YOUR EMPLOYMENT COSTS RIGHT A GUIDE TO BUSINESS PERFORMANCE MEASUREMENTS A Guide to Unemployment Reduction Measures Edwin Whiting

More information

Economic & Financial Market Update

Economic & Financial Market Update Economic & Financial Market Update September 2011 www.wellscap.com James W. Paulsen, Ph.D., Chief Investment Strategist Armageddon Hypochondria!??! Banks are Broke! Consumers Won t Spend! Government Out

More information

Minutes of the Monetary Policy Council decision-making meeting held on 6 July 2016

Minutes of the Monetary Policy Council decision-making meeting held on 6 July 2016 Minutes of the Monetary Policy Council decision-making meeting held on 6 July 2016 At the meeting, members of the Monetary Policy Council discussed monetary policy against the background of macroeconomic

More information

DOI: / Risk and Trading on London s Alternative Investment Market

DOI: / Risk and Trading on London s Alternative Investment Market DOI: 10.1057/9781137361301.0001 Risk and Trading on London s Alternative Investment Market Other Palgrave Pivot titles Franklin G. Mixon, Jr: Public Choice Economics and the Salem Witchcraft Hysteria Elisa

More information

FUNDAMENTALS. Is 2017 the year of Trumpflation?

FUNDAMENTALS. Is 2017 the year of Trumpflation? December 2016 Trumpflation* Follow us @LGIM #Fundamentals FUNDAMENTALS Is 2017 the year of Trumpflation? Although the cycle is maturing, global growth should hold up well next year. However, increasing

More information

Global Financial Markets series

Global Financial Markets series Global Financial Markets series Global Financial Markets is a series of practical guides to the latest financial market tools, techniques and strategies. Written for practitioners across a range of disciplines

More information

GCSE. Accounting. D. E. Turner P. H. Turner MACMILLAN

GCSE. Accounting. D. E. Turner P. H. Turner MACMILLAN GCSE Accounting GCSE Accounting D. E. Turner P. H. Turner M MACMILLAN D. E. Turner and P. H. Turner 1991 All rights reserved. No reproduction, copy or transmission of this publication may be made without

More information

Minutes of the Monetary Policy Council decision-making meeting held on 2 September 2015

Minutes of the Monetary Policy Council decision-making meeting held on 2 September 2015 Minutes of the Monetary Policy Council decision-making meeting held on 2 September 2015 Members of the Monetary Policy Council discussed monetary policy against the background of the current and expected

More information

Policy Reforms after the Crisis

Policy Reforms after the Crisis 367 Policy Reforms after the Crisis Norman Chan The title of this session is supposed to be policy reforms after the 28 9 financial crisis. I think there s a big question about the title because I m not

More information

The Macro-economy and the Global Financial Crisis

The Macro-economy and the Global Financial Crisis The Macro-economy and the Global Financial Crisis Ian Sheldon Andersons Professor of International Trade sheldon.1@osu.edu Department of Agricultural, Environmental & Development Economics Global economic

More information

ECONOMIC OUTLOOK UNIVERSITY OF CYPRUS ECONOMICS RESEARCH CENTRE. January 2017 SUMMARY. Issue 17/1

ECONOMIC OUTLOOK UNIVERSITY OF CYPRUS ECONOMICS RESEARCH CENTRE. January 2017 SUMMARY. Issue 17/1 SUMMARY UNIVERSITY OF CYPRUS The expansion of real economic activity in Cyprus is expected to continue in 2017 at rates similar to those registered in 2016. Real GDP is forecasted to have increased by

More information

Nobuyasu Atago Chief Forecaster, Japan Center for Economic Research

Nobuyasu Atago Chief Forecaster, Japan Center for Economic Research May 2013 SA154 Short-Term Forecast for the Japanese Economy (2013/4-6 2015/1-3) Yen Correction and Rising Stock Prices Boost Economic Recovery - Risk that wealth effect will exacerbate fluctuations in

More information

Macro vulnerabilities, regulatory reforms and financial stability issues IIF Spring Meeting

Macro vulnerabilities, regulatory reforms and financial stability issues IIF Spring Meeting 25.05.2016 Macro vulnerabilities, regulatory reforms and financial stability issues IIF Spring Meeting Luis M. Linde Governor I would like to thank Tim Adams, President and Chief Executive Officer of

More information

Economic Capital. and Financial Risk Management for Financial Services Firms and Conglomerates BRUCE T. PORTEOUS AND PRADIP TAPADAR

Economic Capital. and Financial Risk Management for Financial Services Firms and Conglomerates BRUCE T. PORTEOUS AND PRADIP TAPADAR Economic Capital and Financial Risk Management for Financial Services Firms and Conglomerates BRUCE T. PORTEOUS AND PRADIP TAPADAR Bruce T. Porteous and Pradip Tapadar 2006 Softcover reprint of the hardcover

More information

Developments in the economic situation Asociación Española de Directivos, Santa Cruz de Tenerife

Developments in the economic situation Asociación Española de Directivos, Santa Cruz de Tenerife Haga clic aquí para escribir texto. 01.03.2018 Developments in the economic situation Asociación Española de Directivos, Santa Cruz de Tenerife Luis M. Linde Governor Introduction Let me begin by thanking

More information

Minutes of the Monetary Policy Committee meeting, August 2016

Minutes of the Monetary Policy Committee meeting, August 2016 The Monetary Policy Committee of the Central Bank of Iceland Minutes of the Monetary Policy Committee meeting, August 2016 Published 7 September 2016 The Act on the Central Bank of Iceland stipulates that

More information

Political Economy of Brazil

Political Economy of Brazil Political Economy of Brazil Also by Philip Arestis: FINANCIAL LIBERALIZATION (Co-editor with Malcolm Sawyer) THE POLITICAL ECONOMY OF ECONOMIC POLICIES (co-editor with Malcolm Sawyer) MONEY AND BANKING:

More information

Investigating Social Issues

Investigating Social Issues Investigating Social Issues ECONOMICS TODAY Edited by Andrew Leake The Economics Today series surveys contemporary headline topics in applied economics. Each book in the series is written by an expert

More information

growth but still remains at approximately 1.5% of potential GDP.

growth but still remains at approximately 1.5% of potential GDP. THE UK ECONOMY IN FOCUS/APPLICATIONS Reminder of key objectives: Low and positive inflation (inflation rate target of 2%/- 1%) Sustainable growth of real GDP (no target) falling unemployment (no target)

More information

Macroeconomics Sixth Edition

Macroeconomics Sixth Edition N. Gregory Mankiw Principles of Macroeconomics Sixth Edition 21 The Influence of Monetary and Fiscal Policy on Aggregate Demand Premium PowerPoint Slides by Ron Cronovich 2012 UPDATE In this chapter, look

More information

The Role of Foreign Financial Institutions in Japan's Financial System

The Role of Foreign Financial Institutions in Japan's Financial System September 29, 2014 Bank of Japan The Role of Foreign Financial Institutions in Japan's Financial System Speech at a Meeting Held by the International Bankers Association of Japan Haruhiko Kuroda Governor

More information

Finance 263 Bond Analysis Project July 2007 The real estate boom it s over. What s next?

Finance 263 Bond Analysis Project July 2007 The real estate boom it s over. What s next? Raffaello Curtatone Finance 263 Bond Analysis Project July 2007 The real estate boom it s over. What s next? 2 Preface Data collection This report has been made taking the yields from the Wall Street Journal

More information

Copyright 2017 by the UBC Real Estate Division

Copyright 2017 by the UBC Real Estate Division DISCLAIMER: This publication is intended for EDUCATIONAL purposes only. The information contained herein is subject to change with no notice, and while a great deal of care has been taken to provide accurate

More information

ECB Objectives and Tasks: Price Stability vs. Lender of Last Resort

ECB Objectives and Tasks: Price Stability vs. Lender of Last Resort European Parliament COMMITTEE FOR ECONOMIC AND MONETARY AFFAIRS Briefing paper 2008 No 1 March 2008 ECB Objectives and Tasks: Price Stability vs. Lender of Last Resort Jean-Paul Fitoussi Executive Summary

More information

PLANNING PUBLIC SPENDING IN THE UK

PLANNING PUBLIC SPENDING IN THE UK PLANNING PUBLIC SPENDING IN THE UK Other books by Grahame Walshe International Monetary Reform Mergers and Concentration in British Industry (with P. E. Hart and M.A. Utton) Recent Trends in Monopoly in

More information

Lecture 7. Unemployment and Fiscal Policy

Lecture 7. Unemployment and Fiscal Policy Lecture 7 Unemployment and Fiscal Policy The Multiplier Model As we ve seen spending on investment projects tends to cluster. What are the two reasons for this? 1. Firms may adopt a new technology at

More information

Global Macroeconomic Monthly Review

Global Macroeconomic Monthly Review Global Macroeconomic Monthly Review August 14 th, 2018 Arie Tal, Research Economist Capital Markets Division, Economics Department 1 Please see disclaimer on the last page of this report Key Issues Global

More information

Outlook for Economic Activity and Prices (July 2018)

Outlook for Economic Activity and Prices (July 2018) Outlook for Economic Activity and Prices (July 2018) July 31, 2018 Bank of Japan The Bank's View 1 Summary Japan's economy is likely to continue growing at a pace above its potential in fiscal 2018, mainly

More information